The prolonged legal struggle to erase the debts of nearly half a million federal student loan borrowers is concluding after a recent court decision. This lawsuit, initially filed against Trump’s administration, has involved three presidential administrations and three education secretaries: Sweet v. DeVos in 2019, Sweet v. Cardona under Biden, and now Sweet v. McMahon.
The core of the lawsuit is the borrower defense rule. This rule allows borrowers to request debt cancellation if schools misled them about employment prospects, credit transferability, or potential salaries. During Trump’s tenure, numerous borrowers awaited the review of their borrower defense claims. Advocates argued that the department, led by Betsy DeVos, unlawfully paused claims processing and denied others unjustly.
The class-action suit has affected its name but is set to benefit over 450,000 borrowers, improving their financial situations by over $23 billion, as stated by Eileen Connor of the Project on Predatory Student Lending. Upon completion, this settlement will become the U.S. government’s largest.
Challenges and Delays
In 2022, the Biden administration pledged a pivotal settlement, offering automatic debt relief to borrowers from over 150 colleges, mainly for-profit institutions. The deal also extended an application period for relief, yet processing of these claims saw delays. The second Trump administration processed only 60,000 applications by the agreed deadline. The Education Department now seeks more time to ensure proper distribution of relief.
The U.S. Court of Appeals ruled in July against the department’s extension request, affirming the terms of the settlement were explicit from the start. Education Department spokesperson Ellen Keast acknowledged compliance efforts but criticized the imposed deadlines as unrealistic.
Individual Impact
Jessica Feindt, a Michigan resident and affected borrower, pursued a psychology degree at the University of Phoenix. Despite her efforts and expenses, misleading information from the school thwarted her future academic plans. Her situation exemplifies the broader issue faced by many borrowers.
In 2022, the Education Department disclosed that $12 billion in loans had been discharged for nearly 300,000 defrauded borrowers following the settlement. Recent developments promise further relief. Connor compared this case to the Big Tobacco settlement, labeling loans to deceptive schools as “toxic products.”
After checking her loan account recently and finding it cleared, Feindt expressed mixed emotions, feeling relief but also anger over past hardships caused by the loans.